2 Raising Finance Who needs finance? Every business from its commencement and through its development and growth will need finance. But what type of finance is best suited to the development of your business, and who should you approach for funding? We provide guidance below on types of finance available and outline the planning required before approaching any lending institution. Planning for growth Is finance required? Finance is very often necessary but consider what it will entail. Additional funding requires a commitment in terms of capital and interest payments. Embarking on this course of action must therefore be planned carefully. The business must be capable of sustaining any additional commitment to growth or expansion, and consideration will need to be given to effects on manpower, materials and space. Tapping existing resources Before seeking outside finance, a business must consider whether it could improve its working capital from within. Particular attention should be given to stock and debtors to ensure that both are kept to a minimum. Consider how long it takes to bill customers and collect debts and look at ways to reduce this time. If there are periods of time when surpluses of cash arise, review your affairs to try and ensure these are being used to generate income by investing on temporary short term deposit. We can advise you on all these matters. Business plan Assuming external funding is necessary, planning is essential in achieving success. A well drawn up business plan not only crystallises in your own mind the nature of the project and the timing of any required funding, but is vital to any lending institution. They are unlikely to provide any assistance without a properly drawn up business plan. The plan will include details of: the objectives and aims of the business management and responsibilities products and market share sales plan and strategy the financial position of the business with detailed cash flow forecasts and past accounts. Types of finance General Finance is available in many forms, but it is important to make sure that it is right for your business. Onerous terms and inflexibility can often hinder a growing business. The more obvious sources of finance include bank overdrafts and medium to long term loans and mortgages, but rates of interest can vary considerably. Therefore we advise you to consult with us before making your final decision. Specific Specific methods of finance are available for acquiring assets or releasing cash from debtors. Carefully consider the options available which include: leasing assets hire purchase outright purchase debt factoring invoice discounting. Each method of funding has advantages and disadvantages including implications for tax purposes. Other Other means of finance may be available for your business from government sources, through the issue of shares or even your own pension scheme. Government assistance can be in the form of grants, loan guarantees or an enterprise capital funds. Other grants may be available on a regional or local level. Raising finance by issuing shares may be another option to consider. the purpose of the required funding the business ownership and history Continued >>>

3 Security Whatever form of finance is offered, the lender will always require some form of security. However the level of security sought may vary beware the lender asking for unreasonable guarantees. Fixed and floating charges Most bank loans and overdrafts are secured by way of a fixed charge over land and buildings with floating charges over other assets of the company such as stock and debtors. Personal guarantees For some businesses little security may be available because of insufficient assets. Consequently the security will be given in the form of personal guarantees. Take extreme care before signing these guarantees as they can be difficult to amend at a later stage and many have suffered as a consequence. In particular, personal guarantees are best if they are limited by time or amount. Unlimited guarantees are the most dangerous. General It may be possible to use other assets as collateral such as life insurance policies or by taking a second mortgage over your home. How we can help The means by which finance is obtained will vary enormously according to: the amounts required the nature of the business the risk exposure to the lender the period for which finance is required. Accordingly whilst some generalisations apply, individual circumstances require specific consideration. Time invested in formulating a funding strategy, whilst not guaranteeing success, will provide a structure to guide the growing business. Our experience and contacts can enable you to achieve the means to help your business grow. We would welcome the opportunity to assist you in formulating a business plan and obtaining any necessary finance. For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm. Whatever the means of security pledged, it should be carefully considered and advice sought.

4 National Minimum Wage The National Minimum Wage (NMW) was introduced on 1 April 1999 and is reviewed each year by the Low Pay Commission. Any changes normally take place on 1 October. There have already been a number of instances of employers being penalised for not complying with the legislation. HMRC are the agency that ensures enforcement of the NMW. We highlight below the main principles of the minimum wage regulations. Please contact us for further specific advice. What is the National Minimum Wage? There are different levels of NMW, depending on your age and whether you are an apprentice. The current rates are: the main rate for workers aged 21 and over (from 1 October 2012) the rate (rate applies from 1 October 2011) the rate for workers above school leaving age but under 18 (rate applies from 1 October 2011) the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship (from 1 October 2012). The age at which you become entitled to the main rate was reduced from 22 to 21 on 1 October The apprentice rate was introduced on the same date. The apprentice rate applies to: apprentices under 19 apprentices aged 19 and over, but in the first year of their apprenticeship. If you are of compulsory school age you are not entitled to the NMW. In addition, there is a fair piece rate which means that employers must pay their output workers the minimum wage for every hour they work based on an hourly rate derived from the time it takes a worker working at average speed to produce the work in question. The entitlement of workers paid under this system is uprated by 20%. This means that the number reached after dividing the NMW by the average hourly output rate must be multiplied by 1.2 in order to calculate the fair piece rate. There are no exemptions from paying the NMW on the grounds of the size of the business. Key questions Who does not have to be paid the National Minimum Wage? The genuinely self-employed. Child workers - anyone of compulsory school age (ie. until the last Friday in June of the school year they turn 16). Company directors who do not have contracts of employment. Some other trainees on government funded schemes or programmes supported by the European Social Fund. Students doing work experience as part of a higher education course. People living and working within the family, for example au pairs. Friends and neighbours helping out under informal arrangements. Members of the armed forces. Certain government schemes at pre-apprenticeship level, such as: in England, Programme Led Apprenticeships in Scotland, Get Ready for Work or Skillseekers in Northern Ireland, Programme Led Apprenticeships or Training for Success in Wales, Skillbuild Government employment programmes. European Community Leonardo da Vinci, Youth in Action, Erasmus and Comenius programmes. Share fishermen. Prisoners. Volunteers and voluntary workers. Religious and other communities. Please note that HMRC have the power to serve an enforcement notice requiring the payment of at least the NMW, including arrears, to all family members working for a limited company. What is taken into account in deciding whether the NMW has been paid? The amounts to be compared with the NMW include basic pay, incentives, bonuses and performance related pay and also the value of any accommodation provided with the job. Overtime, shift premiums, service charges, tips, gratuities, cover charges and regional allowances are not to be taken into account and benefits other than accommodation are also excluded. What records are needed to demonstrate compliance? There is no precise requirement but the records must be able to show that the rules have been complied with if either the HMRC or Continued >>>

5 an Employment Tribunal requests this to be demonstrated. Where levels of pay are significantly above the level of the NMW, special records are not likely to be necessary. It is recommended that the relevant records are kept for at least six years. Normally there is not likely to be any serious difficulty in demonstrating compliance where employees are paid at hourly, weekly, monthly or annual rates but there may be difficulties where workers are paid on piece-rates and where, for example, they work as home-workers. Where piece rates are used, employers must give each worker a written notice containing specified information before the start of the relevant pay period. This includes confirmation of the mean hourly output and pay rates for doing their job. What rights do workers have? Workers are allowed to see their own pay records and can complain to an Employment Tribunal if not able to do so. They can also complain to HMRC or to a Tribunal if they have not been paid the NMW. They can call the confidential helpline the NMW for each worker that has been underpaid multiplied by the number of days that enforcement notices are not complied with. There could also be a maximum fine of 5,000 for having committed a criminal offence. Employers who refuse to pay the NMW may also face a fine in excess of 200 for every worker they underpay. Employers have to pay back arrears they owe to workers and those who refused to pay up could be penalised. How we can help We will be more than happy to provide you with assistance or any additional information required. We also offer a full payroll service - please contact us if you would like more information. For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm. What are the penalties for non-compliance? Enforcement notices can be issued if underpayments are discovered and there can be a penalty equivalent to twice the hourly amount of

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